Know Your Rights!!

    Channel Stuffing : Is a practice where the company tries to bolster revenue artificially by granting unsustainable or improper inducements to wholesalers and customers to get them to take its products. A channel stuffing company may also book revenue by transferring goods to an entity that is not totally separate. Channel stuffing has been prevalent in the pharmaceutical industry over the years.   Spring Loading: When one company acquires another, there is usually a period of several weeks between the announcement of the deal and the actual date at which the acquired company becomes part of the acquirer. In that interim, the acquirer may find a way to book higher level of costs and lower revenue at the company being acquired. This process, which takes place before the acquired company’s financial statements merge with those of the acquirer, is intended to suppress the profitability of the firm being bought,   solely for the interim period. Once...

In the Part 1 and Part 2 of the ‘Ten Minutes’ series of New Schedule VI an overview of the Balance sheet and Profit and Loss account changes were dealt with. In this last Part I’d like to touch upon my perspective of certain practical issues in putting Schedule VI in place. Issue 1: The aggregate amount of both long term and shot term loans guaranteed by directors or “others” under each head is to be disclosed. Who does this “others” signify? Solution: The words “others” would mean any person or entity other than a director. It is therefore, not restricted to mean only promoters or related parties. In the normal course, a person or entity will generally guarantee a loan of the company only if it is associated with the company in some manner. Issue 2: A liability is to be classified as current if the company has an unconditional right to defer its settlement for at least 12 months after the reporting date. How will a 5-year loan which the company has taken is r...

The Ministry of Corporate Affairs (MCA as it is called generally) has given the accounting fraternity 2 notifications just before the new year's eve as a welcome gift. The notifications deal with AS - 11 relating to "The Effects of Changes in Foreign Exchange rates". http://www.mca.gov.in/Ministry/notification/pdf/Companies_Amendent_AS_Rules_2011.pdf In the first notification (link above), two changes are introduced: 1. The Companies (Accounting Standards) Rules 2006 will be rechristened as the "Companies (Accounting Standards) Amendment Rules, 2011" and; 2. The foreign exchange gains/ losses can now be capitalised till 2020 (31-3-2020). Earlier the capitalisation was allowed till 31-3-2012. http://www.mca.gov.in/Ministry/notification/pdf/Companies_Second_Amendent_AS_Rules_2011.pdf The notification now called "The Companies (Accounting Standards) (Second Amendment) Rules, 2011 inserted a new paragraph in AS 11. The paragraph 46A is reproduced as under:...